Buying a Car in Nigeria: Tokunbo vs. New vs. 'Hire Purchase'

Owning a car in Nigeria is a major achievement, but also a major expense. Whether you want to escape the stress of Danfo or need a car for Uber/Bolt business, choosing the right payment method is critical.

In the US, people debate "Leasing vs. Buying". In Nigeria, the debate is usually "Tokunbo vs. New" or "Cash vs. Hire Purchase".

The Nigerian Options

1. Cash Purchase (Tokunbo/Nigerian Used)

This is the most common method. You save up cash and buy a used car (usually from Cotonou/Lagos ports).

• Pros: No monthly debt. You own the car instantly. Cheaper upfront.
• Cons: Risk of mechanical faults. No warranty.
• Cost: A decent Tokunbo Corolla might cost ₦4M - ₦7M depending on the year.

2. Auto Loans (Brand New)

Banks like Access, GTB, and Stanbic offer car loans for salary earners to buy brand new cars.

• Pros: Peace of mind (warranty), status, reliability.
• Cons: Expensive (New cars are ₦20M+). High interest rates (25%+).
• Requirement: You usually need to contribute 10-30% equity.

3. Hire Purchase (Work & Pay)

Common for commercial drivers (Uber/Bolt). You get a car, use it to work, and pay weekly installments.

• Pros: Easy entry if you don't have bulk cash.
• Cons: Extremely expensive in the long run (you might pay double the car's value). High pressure to meet weekly targets.

Which is Cheaper?

• Cheapest Option: Buying a Nigerian Used car with cash. It holds value well and has no interest.
• Most Expensive: Hire Purchase due to the high markup.

Hidden Costs of Car Ownership in Nigeria

Before you buy, remember to budget for:

1. Fuel: With subsidy removal, filling a tank can cost ₦30,000 - ₦50,000.
2. Maintenance: Bad roads damage shocks and tires frequently.
3. Papers: Vehicle license, insurance (3rd party or comprehensive), and roadworthiness.

Conclusion

• For Salary Earners: Saving for a neat Tokunbo is usually the smartest financial move. Avoid high-interest loans unless your company subsidizes it.
• For Business: Hire Purchase can work if you are disciplined, but calculate the total repayment first!

Use our Vehicle Loan Calculator to see what a bank loan would actually cost you per month.